MAC2602 Assignment 2 Second Semester 2022

MAC2602
ASSIGNMENT 2

SOLUTIONS




PREPARED BY: MTHOMBENI
0767297208

, QUESTION 1
(a) Net profit of both option 1 and option 2


OPTION 1

Earnings before interest and tax (EBIT) (115 000 000X110%) 126 500 000
Interest expense -
Profit before taxation 126 500 000
Income tax expense (126 500 000 X 28%) (35 420 000)
Net profit 91 080 000




OPTION 2

Earnings before interest and tax (EBIT) (115 000 000X110%) 126 500 000
Interest expense (100 000 000 X 9%) (9 000 000)
Profit before taxation 117 500 000
Income tax expense (126 500 000 X 28%) (35 420 000)
Net profit 82 080 000


(b) The return on assets (ROA) for both option 1 and option 2


OPTION 1

Net profit
Total assets

91 080 000
600 000 000

15.18%




OPTION 2

Net profit
Total assets

82 080 000
600 000 000

13.68%




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